LIMA — Anyone who made less than $69,000 in 2019 is eligible to file their federal tax returns for free with e-file.
But there’s a catch: Each company participating in the Internal Revenue Service’s free federal e-file program sets its own criteria, with different age, residency and income restrictions outside the federal guidelines, which can make it complicated for taxpayers to find a free version they qualify for.
Take TurboTax, one of the most popular online tax prep services developed by the accounting software firm Intuit.
TurboTax’s free version is only available to those whose income is at or below $36,000 as well as anyone filing a simple 1040 return.
The simple 1040, according to a disclaimer from TurboTax, includes basic wages from W-2s and some tax credits, like the child tax credit, earned income tax credit and the standard deduction. The free edition also covers limited interest and dividend income from 1099-INT or 1099-DIV forms, but it does not cover other popular credits like the student loan interest deduction. And it doesn’t cover business income, stock sales or itemized deductions, according to the disclaimer.
TurboTax is far from alone.
The guidelines for each program participating in the IRS free file program are a bit different for each company.
H&R Block restricts its free version to anyone between the ages of 17 and 51 who earned less than $69,000, with exceptions for individuals or couples who are eligible for the earned income tax credit or who are active duty military, according to the IRS free file website.
TaxSlayer has the same income restrictions as H&R Block. But federal returns are only free for taxpayers who are 51 or younger, with the same exceptions for the earned income tax credit and active duty military, according to the IRS free file website. Ohioans don’t qualify for TaxSlayer’s free state returns, however, even though residents of Indiana, Michigan, Kentucky, West Virginia and 19 other states can file a free return when they file a free federal return.
Everyone else is charged $17 for a federal return and $29 for a state return, according to TaxSlayer’s website.
John Navin, dean of the Dicke College of Business Administration at Ohio Northern University, said the varying restrictions allow companies participating in the IRS program — which was designed to help low-income Americans file their federal returns at no cost — to claim their own slice of the market.
The age restrictions, Navin said, allow tax software companies to establish a relationship with younger customers, whose income will eventually surpass eligibility requirements for the free version but who will likely continue using the software anyway.
“If they’ve been using my tax package for five years, they’re familiar with it. Their previous returns are in that package,” Navin said.
But older customers whose income is low enough to qualify for the free version probably won’t see their wages increase much, if at all, Navin said, creating an incentive to establish age restrictions.
“What they’re really trying to do here is grow a market,” he said. “It’s all about their marketing.”
Should you file at home?
Anyone making more than $69,000 last year likely won’t qualify for free tax help, whether they file their taxes at home or through a professional.
Wally Neal, an accountant and tax preparer for State Accounting Service in Lima, recommends seeing a professional after major life changes like a change in retirement, a new marriage or a new child.
“Over the years, I’ve seen a lot of people miss a lot of deductions that they’re not aware of. They want to get it done fast and get their refund,” he said.
Neal has seen clients who continued paying city taxes for years, even after moving elsewhere, because they forgot to update their address with an employer. And he’s seen others who were afraid to claim education credits for tuition or college expenses because they didn’t fully understand the eligibility requirements.
But most people with simple returns can still file on their own, thanks to changes in federal tax law which simplified the process and easy-to-use online software.
“If you don’t have anything complicated there’s no reason to have somebody do your taxes,” Navin said, “but if you do have things that require special tax treatment and you have no knowledge of what it takes, you should have someone do your taxes.”
And lower income families who need help with their returns may qualify for free, in-person tax help through the IRS’ Volunteer Income Tax Assistance program. A full list of participating locations is available at https://irs.treasury.gov/freetaxprep/
Reach Mackenzi Klemann at 567-242-0456.